The altered phenotypic expression and chromosomal characteristics of mouse and human malignant keratinocyte lines have been studied in vitro and in vivo (in comparison with normal primary cultures). The cell lines exhibited different morphologic aspects that are probably more related to their respective degree of differentiation than to different stages in malignancy. Although all cell lines studied were deficient in some aspects of keratinization, certain basic structural and biochemical features were maintained, and these may serve as valid criteria for the identification of their epithelial nature. The altered expression of keratin proteins and morphologic differentiation can be modulated under in vivo growth conditions, but they cannot be reverted toward normality. Chromosomal alterations (in number and structure) occur early and are highly indicative criteria for malignancy, even though no tumor-specific aberrations have been identified. Two new approaches for evaluating characteristics of abnormal growth and differentiation in vitro, and of invasiveness in vivo, have been developed and have proved sensitive test methods for identifying malignant cells. While several abnormalities in growth and differentiation of cell lines in vitro are highly indicative of their malignant nature, the final proof that they are tumor cells still requires in vivo assay. The transplantation assay for studying cellular invasiveness not only improves the sensitivity of in vivo malignancy tests but has also proved to be a valuable model system for elucidating the modulation of differentiation by external influences.